Been called in for an ‘off the record’ meeting? Not seeing eye to eye with your employer? Been offered a redundancy package? Been told to keep it to yourself? Something been brewing for a while? Then a settlement agreement may be not so far away. In this blog we will highlight some of the advantages of versatile legal documents which resolve disputes in the all-important employer-employee relationship.

Advantages

• Confidentiality

All discussions during the negotiation of a settlement agreement are often treated with the strictest confidence or conducted on a ‘without prejudice’ basis. This means that communications cannot then be relied upon in Court.

• Can be used to conclude employment

Most commonly a settlement agreement will be used in the body of a redundancy situation. They can be useful to itemise a compensation payout to an employee, who in turn foregoes their rights to commence a claim at the Employment Tribunal.

• Or can be used to resolve a specific employment dispute.

Occasionally, a grievance may be raised during the employment, rather than at redundancy. A settlement agreement can be advantageous where an employer recognises a wrong doing but is keen to conclude it confidentially.

• Tax free

The first £30,000 of a settlement pay-out may be free of Tax and National Insurance contributions. Any ex-gratia or bonus payments however may not be.

• Retain a reference

When in a redundancy situation, often it will be possible to negotiate the specific wording of a reference, should one be required in the future.

• Management fees are realistic

Entering a settlement agreement to resolve an employment dispute is almost always more cost effective, and much less resource draining than commencing a claim against your former employers.

• Agree to disagree on mutually good terms

The point of a settlement agreement is exactly as the name suggests, to reach an agreement on a settlement, and is entered into by each party on mutually amicable terms. It achieves a clean break between employer and employee with minimal confrontation.

• Costs are often met by the employer

As a perk, it is important for you to have taken independent legal advice from a relevant legal advisor, such as a solicitor. Your settlement agreement will often contain a clause confirming that the employer shall make payment of the reasonable legal costs associated in seeking independent legal advice.